Claiming Irish life pension bonds early

Nelly 21

My husband has a pension with Irish life from a previous job. He hasn't worked in this job in about 15 years. He recently turned 50 and was told he could claim this pension but with penalties. Does any one know the percentage he would lose if he claimed a lump sum now?

We contacted Irish life with regards to this query 2 weeks ago and they told him they would send details out in the post, we've yet to receive the details.

Has anyone got experience with this query?

PaulM1977

Depends if it is a defined benefit or defined contribution scheme. If defined contribution he can transfer to a Buy Out Bond and gain access to it from age 50. With regards to penalties for this, that would need to be highlighted with the buy out bond provider or independent broker that you deal with. It is possible to draw down the buy out bond and not incur penalties, if there are no early encashment charges in the bond selected. More than likely though, the broker will want to charge a fee as he will not be paid a commission if the Buy Out Bond is to be accessed straight away.
If it is a defined benefit scheme, then you would need to seek independent advice with regards to the benefits your husband may be entitled to under the pension scheme. Transferring them out to a Buy Out Bond may not be the best option in this scenario, so get advice as to the best options, once you have received the correspondence from Irish Life. If its been 2 weeks it would be worth putting in another call to them.

PaulM

Nelly 21

PaulM1977 wrote: »

Depends if it is a defined benefit or defined contribution scheme. If defined contribution he can transfer to a Buy Out Bond and gain access to it from age 50. With regards to penalties for this, that would need to be highlighted with the buy out bond provider or independent broker that you deal with. It is possible to draw down the buy out bond and not incur penalties, if there are no early encashment charges in the bond selected. More than likely though, the broker will want to charge a fee as he will not be paid a commission if the Buy Out Bond is to be accessed straight away.
If it is a defined benefit scheme, then you would need to seek independent advice with regards to the benefits your husband may be entitled to under the pension scheme. Transferring them out to a Buy Out Bond may not be the best option in this scenario, so get advice as to the best options, once you have received the correspondence from Irish Life. If its been 2 weeks it would be worth putting in another call to them.

PaulM

Thanks for your reply I normally keep the paperwork from them so I'll have a root through them. To be honest now I've no idea about the schemes you mention so I may have a read!!!

Ill get him to call again about the info!!

PaulM1977

When your husband speaks to Irish Life, ask him to confirm if it is a "Defined Benefit Pension Scheme" or a "Defined Contribution Pension Scheme", they will be able to tell him over the phone.

Merowig

"Early retirement" (from the age of 50) from a defined contribution scheme is also possible without transferring to a bond - subject to approval from the company/ depending on the rules of the scheme. So a buy-out-bond might perhaps not be necessary.

There are also tax implications here
In case your husband is paying now the lower tax rate - depending on how much the pension will be he could end up paying the higher rate.
So perhaps it could be more tax efficient to leave the money in the fund....
Some social welfare benefits are also means tested - pension income can also have impact on this.

Nelly 21

Merowig wrote: »

"Early retirement" (from the age of 50) from a defined contribution scheme is also possible without transferring to a bond - subject to approval from the company/ depending on the rules of the scheme. So a buy-out-bond might perhaps not be necessary.

There are also tax implications here
In case your husband is paying now the lower tax rate - depending on how much the pension will be he could end up paying the higher rate.
So perhaps it could be more tax efficient to leave the money in the fund....
Some social welfare benefits are also means tested - pension income can also have impact on this.

I didnt know there would be tax implications.Thanks for letting me know about that. As it is the government is getting money yearly from the fund at like 300/400.

Merowig

There is no pension levy any more - so the fund shouldn't be taxed now.

Nelly 21

Merowig wrote: »

There is no pension levy any more - so the fund shouldn't be taxed now.

We got a statement in january with a charge. Im gonna get the statement and put up more info

Merowig

For 2015 then. For 2016 it was abolished http://www.budget.gov.ie/Budgets/2016/FinancialStatement.aspx#section13

Henry Ford III

Merowig wrote: »

"Early retirement" (from the age of 50) from a defined contribution scheme is also possible without transferring to a bond - subject to approval from the company/ depending on the rules of the scheme. So a buy-out-bond might perhaps not be necessary.

Yes but if early retirement benefits are taken from the scheme itself then they'll have to be taken using salary/service to determine the maximum amounts payable, and an annuity will have to be purchased. ARF options won't be available.

If the scheme is D.B. ARF options won't be available either.

Nelly 21

We got the letter today from them with options. Its a Personal Retirement Bond that he paid into between 84 - 97.

The options are

Transfer funds to one of the following:

an exempt approved pension plan with new employer or

a personal retirement bond (Buy out bond) or

Immediate retirement option where they offer a tax free sum plus a taxable sum. (Admin fee applies)

You can chose to take all or some of the pension so basically release some money but leave some to continue investing.

PaulM1977

It would still depend on the pension scheme rules that it was transferred out of, for instance was the scheme wound up or did your husband transfer the benefits out himself? How long ago was it transferred in to a Retirement Bond, as if it was in the last 5 years it may have encashment penalties for accessing within these 1st 5 years.

Chipmonkette

Morning all,

Anyone any experience in claiming your cash bond, after receiving 25% earlier? I have a Unit Linked PRB that has matured, as I turned 50!!! I am still gainfully employed, full-time, in another employment.

What penalties are involved in claiming the balance? Do the Revenue Commissioners claim 40% of the final total? And how long do you have to wait till you can claim the balance?

I appreciate that they want to reinvest the rest, which is fine, but there is no info with regard to claiming the hard cash.

Thanks!

Henry Ford III

If you've already claimed your 25% in tax free cash the balance can only be held in a AMRF/ARF or an annuity.

Chipmonkette

Thank you, Henry! Perfect.